OBJECTIVE: To quantify the direct and indirect economic costs of psychotic disorders to both patients and caregivers. METHODS: Data from the Medical Expenditure Panel Survey (MEPS) consist of extensive survey data from approximately 25,000 randomly selected US residents and consist of information on the primary responder and other household members, including demography, healthcare utilization and cost linked to diagnoses, insurance, employment, income, and mental and health status. Patients with a healthcare encounter associated with a psychotic condition comprised the patient cohort, while all other responders were controls. Patients' family members and family members of other responders comprise the caregiver cohort and the controls, respectively. Multiple regressions were used to explain variation in direct expenditures and income loss associated with psychoses, caregivers, various mental and health status, and other appropriate controls. Logistic regressions and multinominal logistic regressions were used for employment status and mental and overall health status. RESULTS: Patient cohort included 112 patients with a psychotic condition. Caregiver cohort included 213 family members. Average annual expenditure from all payment sources was $9,288 per patient for schizophrenic disorders, $3,062 for affective psychoses, and $5,156 for other psychotic disorders. Annual incremental out-of-pocket expenses to patient and family members were $544 for schizophrenic disorders, $583 for affective psychoses, and $767 for other psychotic disorders. The income loss associated with psychoses to the patient ranged from $3,964 to $5,500 (P<0.04). Compared with excellent mental health, poorer mental health was associated with an additional incremental annual income loss. Psychotic patients were 40% less likely to be employed full time (P<0.01), while family members were 25.9% less likely to have full-time employment (P<0.01). CONCLUSIONS: Significant economic burden to both patients and caregivers is associated with psychotic disorders and the use of newer atypical antipsychotics reduces that burden.